Tullow to buy stakes in East African oil licences
Published 03/09/2010 | 05:00
OIL explorer Tullow Oil plans to buy stakes in six exploration licences in Kenya and Ethiopia as the hunt for oil in East Africa gathers pace and operations in Uganda run into problems.
Tullow said yesterday the 50pc positions it is acquiring are in the East African Rift Basin, which has a similar geology to Uganda's Lake Albert Rift Basin where it has discovered oil fields big enough to turn Uganda into a top-50 oil producer.
"The size of the acreage acquired is significant given that it is about 10 times larger than Tullow's acreage in Uganda," said Goodbody Stockbrokers analyst Gerry Hennigan.
Dublin-listed Tullow will become the operator of five licences as part of a deal with Canadian explorer Africa Oil, building on a farm-in agreement on a sixth block in the same region announced in August with Canada's Centric Energy.
Interest in East Africa, which is much less explored than West Africa, has been rising on the back of Tullow's Ugandan discovery and a gas find by US firm Anadarko off the coast of Mozambique in February.
The announcement was a bit of good news for Tullow which saw shares tumble last week after Uganda's energy minister Hillary Onek suggested the company might have lost one of its oil licences, which has expired, for good.
The announcement knocked 9pc off Tullow's shares in a single day, even though Europe's largest independent oil explorer, said it expected a settlement in the coming weeks.
Shares in Tullow Oil were downgraded to "sell" from "strong buy" by London broker Arbuthnot this week due to the problems in Uganda.
"Tullow has effectively had its activities in Uganda shut down due to a prolonged and ongoing tax dispute between Heritage Oil and the government," the broker says in note.
"As a result, Tullow is unable to close its own assets sale process with Total and CNOOC.
"We do not anticipate any short-term positive news flow and consequently there is a continuing high risk of downward pressure on the share price," the note added.(Additional reporting Reuters)